Update: EchoStar Gets Financing For Hughes AcquisitionUpdate: EchoStar Gets Financing For Hughes Acquisition

With the $2.75 billion financing commitment from Credit Suisse First Boston it revealed Monday, satellite-television service provider EchoStar Communications Corp. has cleared the first hurdle in its quest to acquire competitor Hughes Electronics. The financing replaces an identical amount of bridge financing that Hughes parent General Motors Corp. had promised to provide on an interim basis after a similar arrangement with UBS Warburg fell through late last week. The funds will be combined with a matching loan from Deutsche Banc Alex. Brown.

But while EchoStar may have the $5.5 billion it needs to consummate the $26 billion deal, it now begins the laborious process of convincing regulators that antitrust concerns should not lead them to nix the acquisition. It's likely to be a tough task. Washington's sensitivity to antitrust issues is heightened thanks to the landmark Microsoft case and a growing focus on online subscription services being launched by the major music labels and movie studios. Nevertheless, an EchoStar spokeswoman says the company views the deal as a boon to customers and competition in general, and that execs are confident that regulators ultimately will approve the acquisition.

Still, the numbers seem to indicate there are potential obstacles: EchoStar, with 6.3 million subscribers to its satellite-TV service, would become the only U.S. satellite-TV provider of note if it's allowed to swallow Hughes, the GM unit that operates rival DirectTV, the nation's largest satellite-TV service with more than 10 million subscribers. A GM spokesman even acknowledges that some of the company's shareholders are concerned about the antitrust hurdles that are likely to confront the deal, but he says GM officials share EchoStar's optimism that it will be approved. The EchoStar spokeswoman says filings related to the proposed deal will be submitted to the Securities and Exchange Commission and the Department of Justice within the next few weeks.

Adding to the difficulty of selling the deal to the Federal Communications Commission and the Department of Justice is the fact that the combined company would become the only pay-TV option for American households in rural areas where cable infrastructure does not yet exist. Whether that proves to be a sticking point depends on whether members of Congress representing those rural areas are vocal in their opposition, Webnoize analyst Lee Black says. Assuming the deal is approved, Black says he expects EchoStar to introduce advanced services and restructured prices to make up for an investment that amounts to about $2,600 for each acquired customer.